September 26, 2008

Federal Court of Appeals Splits 2-1 on Factor Weighing Discretion Given to District Judges.

In Gisbrecht v.Barnhart, 535 U.S. 789, 807-809 (2002), the United States Supreme Court set forth a new methodology for determining attorney’s fees in social security cases.Under 42 U.S.C. section 406(b)(1)(A), a court rendering a judgment favorable to an attorney-represented social security claimant may allow a reasonable fee not exceeding 25% of the total past-due benefits to which the claimant is entitled, which will be paid out of the past-due benefit judgment.Gisbrecht reversed a Ninth Circuit opinion adopting a lodestar calculation for attorney’s fees, expressing the belief that section 406(b) did not displace the normal 25% contingency fee arrangement as the standard bearer for fee recovery.Carefully, however, Gisbrecht did indicate that district courts have considerable discretion to award fees under contingency arrangements, testing reasonableness of fees based on (1) the character of the representation; (2) the results achieved; (3) attorney fault for delay; (4) amount of benefit award compared to the amount of time spent on the case; and (5) hours spent on the representation and the lawyer’s normal hourly billing charge.(535 U.S. at 808.)Because the Supreme Court left a substantial leeway to the discretion of the district judge, the next Ninth Circuit case is one of the first published decisions to discuss fee awards in the wake of Gisbrecht.

In this Ninth Circuit opinion, the majority found that the district judges did give primacy to the contingent fee arrangements, but decided that adjustments needed to be made so that the fee was reasonable.Adjustments were based on such factors as a readily admitted benefit award, failure to provide evidence on the riskiness of the representation, the relative non-complexity of the matter, and the excessiveness of the requested enhancements (e.g., 82%, 256%, or 279%).The district courts, instead, awarded enhancements of 40%, 40%, and 100%, respectively to the parenthetical requested percentages.The majority did not believe Gisbrecht prohibited lodestar calculations and adjustments, but did preclude district judges from exclusively relying on lodestar calculations and refusing to consider contingency-fee arrangements with social security claimants.(Slip Opn., at p. 13702.)The majority did not believe that Gisbrecht mandated a mechanistic procedure based on using the contingency fee arrangement as the baseline for any future reductions.(Id., at pp. 13702-13703.)The majority wanted to leave a wide ambit of discretion available to the district judges in this substantive area of the law.

Circuit Judge Fletcher, in dissent, believed the district judges and majority circuit judges did not respect the primacy of the contingency fee arrangements as far as awarding fees under Gisbrecht.She calculated that the attorneys received 53.5% to 73.3% less than the contingency contracts provided when compared to the actual fee awards.Circuit Judge Fletcher opined that the majority was resurrecting a lodestar calculation test that was previously adopted by the Ninth Circuit in Gisbrecht—but reversed subsequently by the Supreme Court.